US Crude Slides Under $52 on Rising Shale Production

Oil prices took a significant hit on Wednesday on reports that suggest there has been an increase in US shale production. US crude slipped to under $52 based on news that American producers would boost output at a time when Organization of Petroleum Exporting Countries (OPEC) members will shrink the global supply glut.

February West Texas Intermediate (WTI) crude futures tumbled $0.94, or 1.79%, to $51.54 per barrel at 16:44 GMT on Wednesday on the New York Mercantile Exchange. US crude was able to pare some of its losses after touching as low as $51.21 a barrel earlier in the trading session.

Brent, which is the international benchmark for oil prices, has also been plunging midweek. March Brent crude futures dipped $0.98, or 1.77%, to $54.49 a barrel on London’s ICE Futures exchange.

Despite OPEC moving forward with reductions in oil output, a new US government report found that US shale production is ticking up.

According to the Energy Information Administration (EIA), US shale production is poised to end a three-month decline next month as energy firms reinvigorate drilling activity in order to take advantage of higher oil prices. The EIA said February production will jump by 40,750 barrels per day (bpd) to 4.748 million bpd. The EIA had initially projected a January decline of 5,900 bpd.

Experts had warned that this would happen if OPEC arranged to slash production levels. With Iran and Iraq, two major oil producers, expected to raise their output, the globe could still face a supply glut. But not everyone is convinced of that happening.

Khalid al Falih, Saudi Arabia’s energy minister, told the World Economic Forum on Tuesday that he does not think the US will be adding millions of barrels of oil anytime soon as prices start to recover.

My expectation is that costs will creep up. The supply industry has been decimated. They have been targeting the most prolific areas.

A committee that is in charge of monitoring compliance with the OPEC agreement will meet in Vienna on January 21 and 22. OPEC members are scheduled to meet in Vienna in May. As part of the arrangement, OPEC, non-OPEC producers, and Russia have pledged to reduce their oil production levels by close to 1.8 million bpd.

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